The SafeMoon Founders have been arrested over conspiracy to commit wire fraud and money laundering, per the US Attorney's Office for the Eastern District of New York.

The Securities and Exchange Commission (SEC) filed a complaint on Wednesday against SafeMoon LLC, the company behind the cryptocurrency, along with its creator Kyle Nagy, CEO John Karony, and CTO Thomas Smith. The SEC has accused them of engaging in a significant fraudulent scheme that violated securities laws.

Despite promising to ensure the safety and success of the token, the SEC alleges that the company's leaders covertly withdrew over $200 million in cryptocurrency assets from the project for personal expenses, including the purchase of McLaren cars, luxury homes, and extravagant travel.

At its peak, SafeMoon cryptocurrency had a market capitalization of $5.7 billion, driven by an astonishing surge of over 55,000% from March 12 to April 20, 2021. However, the situation quickly deteriorated when investors discovered that a substantial portion of SafeMoon's liquidity pool was not locked, causing the token's price to plummet by 50%.

According to the SEC, Nagy had assured investors that their funds were securely locked within SafeMoon's liquidity pool and inaccessible even to top executives.

The complaint also alleges that Karony and Smith used misappropriated assets to purchase significant quantities of SafeMoon in an attempt to stabilize the token's price. Furthermore, Karony created a trading account to buy and sell tokens with the goal of creating the appearance of market activity, a practice known as wash trading.

The defendants are facing charges for violating the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934.